Where Is China’s Overheated Property Market Heading?

Where Is China’s Overheated Property Market Heading?

Wang Shi is founder and chairman of China Vanke, the world’s biggest home builder by revenue, and recognizes that China has a problem with the oversupply of housing.

Play Quizzes 4

The city of Yingkou, near the border with North Korea, is just one city where this oversupply cannot be missed. Among gleaming new apartment buildings run 8 lane highways, snaking past an Olympic-themed sports center. The only problem is that there is no one here, writes Jane McMullen for the BBC.

Kyle Bass - China

Exodus Point Outperforms As Rates Trading Profits Jump [Exclusive]

Value Bin Default RatesMichael Gelband’s Exodus Point launched in 2018 with $8.5 billion in assets. Expectations were high that the former Millennium Management executive would be able to take the skills he had learned at Izzy Englander’s hedge fund and replicate its performance, after a decade of running its fixed income business. The fund looks to be proving Read More

Housing oversupply leaves ghost towns in China

“It’s a real problem,” said Wang Shi. “Many cities have an oversupply of housing.” Vanke also has a development in Yingkou, which Wang admits has come into some difficulties. He would not let the BBC journalist take a tour of the property.

All over China there are empty developments waiting to be filled, evidence of a construction boom that drove fast economic growth but has now stalled. However Wang Shi is not worried.

“In the west, if a city faces financial difficulties, it’ll go bankrupt. But in China, cities will be subsidised by the Ministry of Finance. So some small- and medium-sized cities aren’t worried about going bankrupt. They figure the central government will help them out,” he said.

Promise of Beijing bailout shores up confidence

It may seem amazing, but the Chinese developer is convinced that central government will bail out companies and local authorities should they get into financial difficulties. Careless spending by Chinese local governments has contributed to the largest debt bubble the world has ever seen, and it cannot keep growing forever.

Wang Shi is now working to help China solve its economic problems. “We have influence. That prompts the question, is this influence there to bring a product to market? Or does it mean social responsibility, helping to shape the future of the market?” he said.

Wang and Vanke are helping to promote pre-fabricated and low-carbon buildings, tapping into frustration at high levels of pollution in China. Despite rising borrowing costs and slowing profits, Vanke is still in good shape.

Wang Shi is starting to look abroad for business as the financial situation in China becomes riskier. “We are establishing an international network: San Francisco, New York, London, Berlin, Paris. We are targeting the Chinese market as they buy overseas,” he said.

There are concerns that Chinese investment in foreign property could expose host countries to a future Chinese property crash, but Credit Suisse analyst Jinsong Du believes that Beijing will support the largest developers if they got into trouble.

Updated on

While studying economics, Brendan found himself comfortably falling down the rabbit hole of restaurant work, ultimately opening a consulting business and working as a private wine buyer. On a whim, he moved to China, and in his first week following a triumphant pub quiz victory, he found himself bleeding on the floor based on his arrogance. The same man who put him there offered him a job lecturing for the University of Wales in various sister universities throughout the Middle Kingdom. While primarily lecturing in descriptive and comparative statistics, Brendan simultaneously earned an Msc in Banking and International Finance from the University of Wales-Bangor. He's presently doing something he hates, respecting French people. Well, two, his wife and her mother in the lovely town of Antigua, Guatemala. <i>To contact Brendan or give him an exclusive, please contact him at theflask@gmail.com</i>
Previous article Howard Marks: View On China Has Swung From Flawless To Hopeless
Next article high-risk savings account – Open Yours Today!

No posts to display